Selling Your Practice Under Ideal Conditions or Under Duress

Episode #435 with Paul Sletten

Selling is one of the most important things you will do in your practice life. But whether you're the seller or the buyer, you want to ensure ideal conditions. And to help you in that process, Kirk Behrendt brings back Paul Sletten from the Sletten Group to share his expert advice so you can plan, prepare, and transition successfully. You will likely sell your practice only once. To learn how to do it right and under the best conditions, listen to Episode 435 of The Best Practices Show!

Main Takeaways:

Have a plan for selling under ideal conditions.

Also have a plan for selling while under duress.

Be prepared so that you have more options.

Buying from needy sellers is very dangerous.

Fixer-uppers are usually dangerous situations.

Don't buy or sell on your own — get an expert!

Quotes:

“If the seller comes to the closing table in a financially needy position, they’ve got to score a big win. Look out, buyer. Because it’s liable to be a biased process, a stacked deck, if you will, because they’ve got to scratch every cent out of the sale of that practice.” (3:33—3:55)

“If they’ve done a great job planning and implementing their plan financially over their career, the sale of the practice — even though it’s a big number, typically, in a healthy practice — is really only the icing on the cake. So, if you're going to have a win-win outcome, you can't have someone needy sitting at that closing table.” (3:57—4:19)

“I think an ideal selling price for a practice is what a talented buyer can afford to pay for it. Reducing the debt, retiring a debt over a reasonable period of time, say seven to 10 years, and getting an ever-improving lifestyle in the process so they're not an indentured servant while they're paying off the practice, I think that's what a practice is worth.” (5:17—5:46)

“I don't think I can ask [a dentist if they need the money from the sale] early in the process. But as you're going through the process, certainly. That's a question we ask everyone that we’re helping to sell a practice, ‘What kind of condition are you in for your retirement, and what sort of a contribution does the sale of your practice need to make?’ And we get right on that topic upfront. And sometimes, in those situations — sometimes, not always — the seller is going to come to us and literally tell us upfront, ‘Here’s what I need out of the sale of my practice.’ And we very nicely let them know that this isn't the way it works. Your practice is going to be worth what it’s worth based on a whole bunch of criteria, and we’re going to do a formal practice valuation.” (7:06—8:03)

“Ideal conditions would be where you have a healthy owner and a practice trending well. Maybe it’s a little bit flat, but it’s not in decline. So, it’s a healthy practice. You've got a good team in place; you have a good reputation; you have a good net profit; you have good patient numbers. Or in the case of a specialty practice, you've got a good referral base and that kind of thing. So, it’s all systems-go. It’s something that someone is going to be able to step into and ride it into their own successful career because it’s really doing well. That's what we call ideal conditions.”  (8:19—9:07)

“Duress is when the owner of the practice is ill, or is injured, or had died, and the practice has been impacted in a huge way by those conditions. And so, here, you have a real high, strong sense of urgency to get it sold as fast as you possibly can. You still want to sell it to the right person and all of that. But everybody needs to have a plan for selling under ideal conditions, and a plan for what to do if something bad happens, God forbid.” (9:11—9:53)

“We’ve had so many situations that we’ve had to deal...